The ChainLink (LINK) price increased by 41% on Sept. 24. While the price has broken out from a bullish pattern, the current movement is still more likely to be a correction than the beginning of a new upward movement.

LINK Bounces at Support

The LINK price has been decreasing alongside a descending resistance line since it reached a high of $20.71 on Aug. 17. The decrease has been significant and continued until the price reached a low of $7.28 on Sept. 23. This movement validated the $7.50 area as support.

The $7.50 area is also strengthened by the presence of the 200-day moving average (MA). Once the price reached this area, it created a bullish engulfing candlestick, increasing all the way to $10.40 in a single day. The increase from low to high measured 41%.

Currently, the price is attempting to move above the minor $10.40 resistance area and possibly the descending resistance line drawn from the highs.

LINK Chart By TradingView

Cryptocurrency trader @PostyXBT tweeted out a LINK chart, stating that the price is approaching the 200-day moving average (MA) support. As seen in the chart above, the price initiated a very strong bounce once it reached the MA.

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Source: Twitter

Reversal or Relief?

The six-hour chart shows that the price has broken out from a descending resistance line. The breakout was preceded by considerable bullish divergence in the RSI & MACD, increasing its validity.

LINK Chart By TradingView

However, the daily chart does not confirm that the trend is bullish. The RSI is below 50, and the Stochastic Oscillator has not made a bullish cross. The MACD has just begun to increase, having created one higher momentum bar.

Until the price breaks out from the longer-term resistance line or a bullish cross transpires in the Stochastic Oscillator, we cannot state that the trend is bullish.

LINK Chart By TradingView

Wave Count

Since the aforementioned Aug. 17 high, the LINK price has completed a five-wave bearish formation (shown in black below). Since waves 1 & 4 overlap, it is likely that the movement was a leading diagonal, also supported by the wedge-like shape.

Furthermore, volume decreased during the wave-5 bottom and picked up during the breakout, customary in such movements.

LINK Chart By TradingView

In the longer-term, it is possible that this entire decrease has been the A wave (orange) of a longer-term A-B-C correction.

If so, the price could increase all the way to the 0.618 Fib level at $15.26 before resuming its downward movement.

LINK Chart By TradingView

To conclude, while the LINK price is expected to increase in the short/medium-term, it is more likely that the price is still engulfed in a longer-term correction.